Arab Journal of Administration المجلة العربية للإدارة


This paper compares and evaluates the performance of eight different multifactor asset-pricing models to identify and explain Anomalies in Saudi stock market (SSM). Data set of daily stock prices and returns are collected for all companies that issue shares (152 companies) which represent all sectors in the SSM during the period from 2009 to 2013. The 25 size-BE/ME portfolios are formed by the intersection of size and BE/ME quintiles (5x5 Size-BE/ME sorts). The empirical results show that each of capital asset pricing models CAPM, the Fama-French three-factor model, the Cahart model, the four factor model of Chan and Faff four factor model and the five -factor model (Adding liquidity to four factor model) have coefficients of the factors (Bp, Sp, hp, wp and L ) to be significantly different from zero. Furthermore adjusted R2s range from 29% to 78% but all of them produce an intercept that is significantly different from zero for 12-16 portfolios. However, by adding leverage and test the six-factor asset pricing model, the evidence confirms the significance of this model to explain return variation with adjusted R2 ranges from 39% to 83% and the intercept are not significant for 17 portfolios out of 25. Moreover, the results of testing six-factor model by adding standard deviation of residual-provide supportive evidence to the six-factor model.